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U.S. Data Says “Boom:” Part Base Effect, Part Transient, Part Real

Prologue The much anticipated economic boom has finally arrived!  The NY Fed Weekly Economic Index exploded to the upside in late March and early April (see chart above).  Retail Sales were up an amazing +9.8% M/M in March!  That number is not Y/Y.  The Y/Y number was +27.7%, but was greatly influenced by depressed Retail Sales last March when the economy was beginning to shut down.  April’s Y/Y number will …Read More

The Rate Spike Will Damage the Recovery

Fed Intervention Needed There was quite a spike in interest rates the last week of February with the 10-Year T-Note spiking from a 1.36% level as of the close on Wednesday to as high as 1.60% intraday with a close of 1.55% on Thursday.  Friday’s close was 1.45%.  But, a lot of damage was done. It is naïve to think that this spike was caused by the inflation narrative, i.e., …Read More

Markets Are Bubbly – The Economy, Not So Much

Not a Bubble?  The equity markets have been driven by momentum and speculation these past few weeks, not by underlying business fundamentals.  We had GameStop, followed by Silver, then Pot stocks, and now SPACs, all driven by retail.  PE ratios are in the top 1% of their historical range.  Junk bond yields are at all-time-record low levels (sub 4%).  In January, the worst stocks based on business fundamentals, significantly outperformed …Read More

The Economy: Damaged Labor Markets; An Inflation Head Fake

On Friday, February 5, markets were set to rise no matter what the employment data showed.  If they beat to the upside, that would validate the reflation/pent-up demand narrative.  If they disappointed, well, that would simply mean more fiscal and monetary largesse (which financial markets love).  Either way, heads markets rise; tails, ditto. Labor Market Signals: Positive, Negative and Mixed As it turns out, there was validation for every viewpoint …Read More

Bubble Markets Display Bizarre Behavior

Right Before They Tumble Like the Dot.Com bubble of the late ‘90s, the typical signs of an approaching bubble bust were on full display in the equity markets last week (week ending January 29th).   GameStop (GME) and other failing or troubled companies (AMC, Blackberry, Nokia, Bed Bath) have become the darlings of the WallStreetBets (WSB) crowd (a gang of small retail investors tethered together via social media).  Last week, they …Read More

“V” vs. “u” and the Flawed Inflation Narrative

The equity markets finally took a breather last week (ended January 15th), with the S&P 500 falling a mere 1.5%; that’s down from its record high a week earlier.  Perhaps the really poor economic data played a role, but then again, equity markets like such poor data because it means more stimulus (Biden’s $1.9 trillion plan), and markets know that much of the stimulus always finds its way into the …Read More